Industry Trends, January 2023
Updated: Sep 5
The index of all industry production in October 2022 fell dramatically, mostly in mining and service industries. In contrast, retail sales were adjusted slightly and construction completed is on the rise by increasing for three straight months.
In October, the production of all industry rebounded slightly in the semiconductor sector but nosedived in overall due to decreases in automobiles, machinery equipment, primary metal and chemical products. Service industry production fell as financial and insurance industries decreased as less stocks were traded, and the sluggish imports and exports and house trading caused a decline in transportation warehouses and real estate. Despite the increased consumption of non-durable goods, retail sales dropped slightly due to the decreased consumption of durable and semi-durable goods. In contrast, facilities investment remained stable as investment in machinery including wireless communication devices increased while investment in transportation equipment decreased. Investment in construction surged as construction and civil engineering projects both increased, supported by the construction of large-scale commercial facilities and the brisk performance of display-related plants. The cycle variation value of the coincident composite index remained unchanged (0.0 percentage point) by reflecting improved employment and reduced production of mining and manufacturing industries, and the leading index fell by 0.1 percentage point due to the slow financial market and deteriorating economic sentiment. Amid worsening exports and investment conditions caused by the global economic slowdown and the downturn in semiconductors and real estate, the recovery of domestic consumption is limited, raising uncertainties in the economic trend. On the production side, positive prospects such as falling global oil prices and resolution of disruptions in supply chain exist, which may be burdened by factors including the continuation of falling exports and the effect of the truckers’ union refusing to transport goods. In case of consumption and investment, there are positive signs including the increase of foreign tourists and the FIFA World Cup boosting sales, but factors such as the aftermath of the Itaewon incident, the downward trends of semiconductors and real estate, the ongoing high inflation, and interest rate increases may pose risks.
※ Source: Ministry of Economy and Finance (moef.go.kr)
‘Auto industry in Q3 witnessing the resolution of continued disruptions in parts supply’
→Auto production in September 2022 increased by 30.9 percent year-on-year supported by the base effect of the previous year and the increase in exports. Domestic consumption in October grew for three consecutive months year-on-year driven by increased supplies. The sales of Korean cars gained 12.6 percent as more new cars were shipped thanks to the base effect of the previous year and the easing of difficulties in sourcing semiconductors. Exports in October grew by 20.4 percent from the same period of the previous year, driven by the increased demand for EVs and exports to the United States. The exports of finished cars gained 28.5 percent supported by the strong demands for Korean eco-friendly cars and the increased exports of GM Korea, Renault Korea and Ssangyong. The exports of auto parts grew by 3.2 percent as more cars are produced globally and exports to the US increased by 30.3 percent.
‘Production index continues recovery, exports down and imports up’
→In September 2022, imports increased by 20.9 percent year-on-year as the imports of ship engines dropped but those of cargo ships and ship parts grew. Exports in October 2022 fell by 2.6 percent year-on-year due to the exports of ships ordered during a low-price period and the decreased delivery volume. As the International Monetary Fund lowers the world’s growth projection for 2023 and the market condition worsens, global ship orders plunged by 32 percent year-on-year in September, but Korea continues to win orders by carrying on with the LNG carrier agreement with Qatar.
‘Production continues to grow and exports down further due to slower exports to China’ →In September 2022, production increased by 11.2 percent year-on-year and 1.1 percent month-on-month supported by domestic demand. Production saw a two-digit growth for two straight months as domestic shipments and facility investment continue to grow and machinery orders also maintain solid performance. Imports in September dropped by 3.4 percent from the same period of the previous year due to sluggish exports to China. However, demands from the United States and Europe are maintained due to increased investment, and exports to India and ASEAN are also on an upward trend supported by the recovery in manufacturing facilities investment.
‘Slow demand and supply shock trigger a record fall in steel production’
→Steel production in September 2022 plunged by 27.8 percent year-on-year due to sluggish demands and production disruptions caused by the aftermath of the typhoon that had hit Pohang. Slow domestic demand and falling unit prices caused September imports to decline by 28.1 percent year-on-year. Exports in October nosedived by 20.8 percent year-on-year, hit by disruptions in domestic production and slow global demand.
‘Exports of petroleum products continue growth despite regular maintenance in Korea’ →Production in September 2022 gained 6.8 percent year-on-year driven by the increased exports of transport fuel and especially aviation fuel. Exports in September saw a 6.6 percent increase as more aviation fuel, diesel, and bunker C were exported. Exports in October grew by 7.6 percent year-on-year to record USD 4.39 billion, supported by the recovery in global demand centered on aviation fuel and natural gas whose demand as an alternative resource is growing amidst the prolonged war in Ukraine.
Wireless communication devices
‘Global economic slowdown causes the global mobile phone market’s reverse growth’
→Production in September 2022 grew by 15.3 percent year-on-year, and shipments also increased by 17.9 percent while inventories fell by 4.6 percent to show signs of recovery of demands in the second half. Smartphone shipments in Q3 gained slightly from Q2 when shipments failed to reach 0.3 billion units. In September, the number of mobile telecommunication subscribers in Korea creeped up by 3.1 percent year-on-year and 0.4 percent month-on-month. September imports saw a decrease of 8.4 percent mostly in mobile phones and parts. Exports in October fell, most notably the exports to nations including the US, ASEAN and India.
‘Exports on a full-scale downward trend’
→Production and shipment of semiconductors in September 2022 fell by 3.5 percent and 0.9 percent year-on-year, respectively, to result in a decrease of both production and shipment. Exports in October fell by 14.7 percent year-on-year to stand at USD 9.23 billion, leading to a decline of three consecutive months, which ended a long-term rally. The export outlook is uncertain as the unit price of memory chips - Korea’s major export item - continues to decline.
‘Slow demand and base effect cause exports to continue declining’
→Production continues to decline in September 2022 as the economic slowdown dampens the demand for panels. Exports in October plunged by 7.9 percent to decline for the fifth consecutive month due to reduced production of LCDs and declining demands for smartphones. In comparison, OLED exports grew by 3.8 percent as the increase in shipments of high value-added products pushed up the unit prices of exported panels.
*Note: The latest data available in Statistics Korea are for the previous month in the case of exports and the month prior to the previous one for production.
※ Source: Korea Institute for Industrial Economics and Trade(kiet.re.kr)
*This article is extracted from Invest KOREA information center, 2023.